But Raising Money for Programs is Easier!

Posted by on May 20, 2014 in Board Development, Communication, Donor Cultivation, Featured, Plans and Budgets | 1 comment

But Raising Money for Programs is Easier!

 

A recent client reported that one of her board members had recruited a $5,000 donation from one of their members. Apparently it was quite a surprise. The donor simply called the board member out of the blue and announced her intention because of “all the great work you guys are doing in the valley.”

“Great!” said the board member. “Where would you like us to use the money?”

“I don’t know. Where do you need it the most?”

“Well, we’ve been talking about building up the endowment recently. If it’s OK with you, we can put it there.”

If that scenario makes you cringe, you are not alone. Throughout the land trust community, well-meaning board members are interacting with donors and turning unrestricted gifts into restricted ones. Why? In this case, probably because of the gift amount – nobody would give $5,000 for operations, would they?

We need to get out of our own way. Any money left unrestricted could be applied to endowment if the ED and/or the board determined that doing so was the highest and best use of the funds.

This is what I say to donors: “We completed a project yesterday because this organization was in place when the landowner was ready to protect it. That possibility was created by folks like you who have donated money over the past several years. The money you donate today will create the possibility of conservation for the next landowner who’s ready.”

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OK, put it this way: wouldn’t it be better if EVERYONE left their gifts unrestricted? Our financial statements would be simpler and cheaper to prepare. We could focus our attention on land protection, stewardship, easement landowner relations, and community engagement. And we could prioritize our work on what was most important instead of most-likely-to-be-funded.

One of the blogs I’ve begun to follow is Nonprofit With Balls, a mix of wicked humor with sober thinking about common every-day problems most Executive Directors face at one time or another. This week’s deposit was about the difficulty raising money for operating expenses and how our own behavior gets in the way.

The author, Vu Le, a Seattle-based ED of a Vietnamese nonprofit, asks us to imagine running a bakery with the same restrictions as nonprofits face:

Yes. I need a cake for some gluten-free veterans. I can pay you only 20% of the cost of the cake, and you can only spend my money on eggs, but not butter, and certainly not for the electricity; you have to find someone else to pay for the oven’s electricity. Also, you need to get an accounting firm to figure out where you’re spending my money, but you can’t use my money to pay for that service.”

Vu offers the following advice for those interested in being a part of the solution instead of part of the problem.

  1. Stop saying “100% (or 98%, or 95% or whatever) of your donations go into programming.” It makes it seem like paying for anything else (like salaries and electricity) is bad.
  2. Publically recognize funders who support general operating funds. The louder our praise, the more likely other funders will follow suit.
  3. Stop using the term “overhead” or “indirect.” Vu suggests “critical infrastructure” or “core support” instead.
  4. Stop artificially deflating numbers and apologizing for percentage spent on critical infrastructure. Keep it simple and transparent – and don’t apologize for how much it actually costs to deliver important outcomes.
  5. Stop seeking the approval of charity watchdog organizations like Charity Navigator, Charity Watch, and Better Business Bureau/Wise Giving Alliance. They focus on meaningless indicators like how much you spend on overhead instead of more important indicators like outcomes, effectiveness, and sustainability.
  6. Write in a line-item for reserve funds in your organization’s operating budget. Under almost any scenario, this would be considered “critical infrastructure.” But it’s very difficult to argue with it.
  7. Push back, and be willing to lose a funder. Is tracking all the grant restrictions actually costing you more than the grant is worth? Push back!

To Vu’s terrific list, I would add three more:

8. Pass a board resolution requiring that 20% of all grants be made available to administer the grant. Exceptions may be made on a case by case basis, but until the donor actually refuses to budge, your operations expenses will be that much closer to being covered.

9. Raise money for the “conservation costs” instead of the purchase price. The conservation costs are as follows:

  • the purchase price
  • the closing costs,
  • the first several months of “start-up” stewardship (signage, trash pick-up, and so on),
  • the first year’s worth of stewardship costs (before endowment kicks in),
  • the stewardship endowment, and
  • 20% critical infrastructure

Even though the result will be a much bigger number, and even though you’ll have to explain to donors why the cost of conservation is so high, raise the total all at the same time. It will be much easier that raising the purchase price first and trying to raise the rest separately.

10. Never – ever – turn an unrestricted gift, into a restricted gift. Try simply saying “Thank you” instead.

Got your own ideas? I’d love to hear from you.

-da

One Comment

  1. Thanks, David, for the shout-out. I did cringe reading about turning an unrestricted gift into a restricted one. It’s time we nonprofits become more organized around our key messages. Unrestricted gifts = better outcomes.